Mrs. Sangita Sethi & Ors. vs Sebi

Date of Decision: 02.03.2020

Appeal No. 138 of 2018

1.

Mrs. Sangita Sethi

2. Mr. Sanjay B. Sethi HUF

3. Ms Soniya Sethi

4. Mr. Sudhir B. Sethi HUF

5. Mr. Sudhir B. Sethi

6. Mr. Sohil Sethi

7. Mr. Babulal Sethi

8. Mrs. Tara Sethi HUF

9. Mr. Babulal Sethi HUF

10. Mr. Sanjay Sethi

Address for the Appellant Nos. 1 to 10 133, Kanchan Bag, Indore- 452 001 ...Appellants

Versus

Securities and Exchange Board of India, Mittal Court, B-Wing, 1st Floor, Nariman Point, Mumbai- 400 021 ...Respondent

Mr. Vinay Chauhan, Advocate with Mr. Kamal Agrawal, for the Appellants.

Mr. Abhiraj Arora, Advocate with Mr. Vivek Shah, Advocate i/b ELP for the Respondent.

CORAM: Justice Tarun Agarwala, Presiding Officer Dr. C.K.G. Nair, Member Justice M. T. Joshi, Judicial Member

Per: Justice Tarun Agarwala (Oral) 2

1. The present appeal has been filed against the order of the

Adjudicating Officer ("AO" for convenience) of the Securities

and Exchange Board of India ("SEBI" for convenience) dated

February 28, 2018 imposing a penalty of ` 25 lakhs under

Section 15H of the SEBI Act for violating the provisions of

Regulation 3(1) and Regulation 3(3) of the SEBI (Substantial

Acquisition of Shares and Takeovers) Regulations, 2013

("SAST Regulations' for convenience) for non-disclosure of

acquisition of shares.

2. The appellants had crossed 25% of voting rights in the

target company pursuant to the purchase of shares thereto

triggering Regulation 3(1) and Regulation 3(3) of the SAST

Regulations. Proceedings were initiated and, after considering

the reply, the Whole Time Member ("WTM" for convenience)

passed an order dated August 24, 2017 directing the appellants

to make a public offer in terms of Regulation 13(2) of the SAST

Regulations. Instead of complying with the order of the WTM

and making a public announcement the appellants chose to file

Appeal No. 304 of 2017 which was withdrawn on November

06, 2017 with liberty to file afresh. It transpires that a fresh

Appeal No. 393 of 2017 was again filed which was again

dismissed as withdrawn on February 02, 2018. 3

3. The appellants did not comply with the order of the WTM

or the directions of this Tribunal. In the meanwhile, notices

were issued by the AO initiating proceedings for non-disclosure

of the acquisition of shares in violation of Regulation 3(1) and

3(3) of the SAST Regulations. The WTM after considering the

reply passed the impugned order imposing penalty of ` 25 lakhs

to be paid jointly and severally. The appellants being aggrieved

have filed the present appeal.

4. This Tribunal in its order dated January 06, 2020 recorded

that the open offer had not been made within the stipulated

period. The default was admitted and accordingly the Tribunal

directed the appellants to deposit the entire penalty that was

levied and further direct that it would be open to the appellants

to question the quantum of penalty at the time of hearing of the

appeal. Pursuant to our order, the amount has been deposited.

5. Having heard the learned counsel for the parties, we find

that the default committed by the appellants in violating

Regulation 3(1) and 3(3) of the SAST Regulations is admitted.

Regulation 3(1) of the Act provides that acquisition of voting

rights exceeding 25% requires the acquirer to make a public

announcement of an open offer for acquiring shares of the target 4

company. In the instant case, admittedly such public

announcement of an open offer was not made before acquiring

the shares.

6. Further in the instant case, the direction of the WTM to

make an open offer within the stipulated period was also not

complied with. After passing of the order of the Tribunal dated

February 02, 2018 the appellants still did not make any effort to

make an open offer. By making an offer now in January 2020

does not entitle the appellants to pray for mitigation of the

quantum of penalty. The submission that the appellants are also

paying interest at the rate of 10% per annum for the delay in

making the open offer cannot be a ground to lessen the quantum

of the penalty imposed. The law requires that if an open offer is

not made within the stipulated period then penalty can be

imposed. The AO was kind enough not to impose the

maximum penalty of ` 25 crores under Section 15H of the Act

but considering the circumstances has only imposed a penalty of

` 25 lakhs which is just and proper in the circumstances of the

case. Reliance made by the appellants on the decision of this

Tribunal in Contact Consultancy Services Pvt. Ltd. vs. SEBI in

Appeal No. 138 of 2004 decided on 17.11.2004 and on the 5

decision of SEBI in Shri Radheyshyam Lahoti and Ors. is

distinguishable and not applicable in the instant case.

7. For the reasons stated aforesaid, the appeal lacks merit and

is dismissed.

Sd/-

Justice Tarun Agarwala Presiding Officer

Sd/-

Dr. C.K.G. Nair Member

Sd/-

Justice M. T. Joshi Judicial Member 02.03.2020 Prepared & Compared By: PK